Note
1 - Organization and Basis of Presentation
Organization
and Line of Business
Mountain
High Acquisitions Corp., formerly known as Wireless Attachments, Inc., (the “Company”) was incorporated under the
laws of the State of Colorado on September 22, 2010. The Company was incorporated for the purpose of developing solar cloth membranes
for outdoor active wear that covert sunlight into electrical power and that can be used for charging and/or operating mobile devices
such as the iPod and the iPhone.
Canna-Life
Corporation (“Canna-Life”) was incorporated in the State of Colorado on January 29, 2014. On March 6, 2014, the Company
entered into a share exchange agreement with Canna-Life. Pursuant to the agreement, the Company acquired from Canna-Life all of
the issued and outstanding capital stock consisting of 8,104,000 shares of common stock in exchange for 8,104,000 shares of the
Company’s common stock.
Concurrently
with the closing of the transaction, Alan Smith, Chief Executive Officer of Canna-Life purchased 120,000,000 shares of the Company’s
common stock from the Company’s majority stockholder. In addition, Mr. Smith then entered into an agreement with the Company
pursuant to which he returned 113,500,000 shares of the Company’s common stock for cancellation. Mr. Smith was not compensated
for the cancellation of his shares of the Company’s common stock. Upon completion of the foregoing transactions, the Company
had an aggregate of 23,892,000 shares of common stock issued and outstanding of which 14,604,000 shares (61%) were owned by the
former stockholders of Canna-Life.
The
exchange of shares with Canna-Life was accounted for as a reverse acquisition under the purchase method of accounting since Canna-Life
obtained control of the Company and the Chief Executive Officer of Canna-Life became the Chief Executive Officer and sole director
of the Company. Accordingly, the merger of Canna-Life into the Company was recorded as a recapitalization of Canna-Life, Canna-Life
being treated as the continuing entity. The historical financial statements presented are the financial statements of Canna-Life.
The share exchange agreement has been treated as a recapitalization and not as a business combination; therefore, no pro forma
information is disclosed. At the date of this transaction, the net liabilities of the legal acquirer, Mountain High Acquisitions
Corp, were $36,110.
As
a result of the reverse merger transactions described above the historical financial statements presented are those of Canna-Life,
the operating entity. The Company is now engaged in the business to hold, develop and manage real property.
On
April 30, 2015, the Company entered into a Sale and Purchase Agreement to sell Canna-Life Corporation (the "CL Agreement")
to Evolution Equities Corporation and Alan Smith ("Purchasers"). Under the terms of the CL Agreement the Company sold
8,104,000 (100%) of its shares of Canna-Life and execute a Note Payable for $80,000 to Evolutions Equities Corporation in exchange
for the extinguishment of $490,416 of debt due to the Purchasers at March 31, 2015 and $1.00 cash. As a result of this transaction
all activity for Canna-Life has been reclassified as discontinued operations in the financial statements for MYHI.
On
May 19, 2015, the Company entered into the First Amendment to the Share Exchange Agreement with Freedom Seed and Feed Shareholders,
the "FSF Agreement" or "FSF", to acquire the controlling shares of Freedom Feed and Seed in exchange for 31,429,000
shares of MYHI. During the due diligence process the Company advanced $75,645.30 to FSF for operating expenses. The Company executed
notes payable for the advanced funds. On June 30, 2015, the Company executed a Rescission Agreement with FSF canceling the FSF
Agreement. The Company was unable to collect the amounts advanced to FSF and wrote off the advance to Other Income (Expense) in
June 2015.
On
May 22, 2015 the Company completed the acquisition of Greenlife Botanix ("Greenlife") as detailed in the First Amendment
to the Shareholder Agreement dated February 8, 2015. The Company issued 10,000,000 restricted shares of its common stock to the
shareholders of Greenlife in exchange for their 100% interest in Greenlife. The shares were valued at the market value on the
date of issuance, $0.23, for a total consideration of $2,300,000. The amount paid for Greenlife was recorded as Goodwill due to
the start up nature of Greenlife and the minimal net assets of Greenlife at the time of acquisition. Subsequent to the purchase
of Greenlife the Company entered into a rescission agreement with Freedom Seed and Feed, "FSF", which impaired the integration
of Greenlife and FSF into a fully integrated cosmetic company. Due to the rescission of FSF and the remarketing of the Greenlife
product line the Company evaluated the book value of the asset and elected to impair the Goodwill value of Greenlife and expensed
the $2,300,000 book value in the three months ended June 30, 2015.
Going
Concern
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has
incurred a net loss of $2,724,422 and used cash for operations of $94,872 for the nine months ended December 31, 2015 and has
an accumulated deficit of $5,182,662 and a working capital deficit of $491,839 as of December 31, 2015. These conditions
raise substantial doubt as to the Company’s ability to continue as a going concern. These consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty. These consolidated
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a
going concern. Management plans to continue to raise capital to fund the Company’s operations and believes that it can
continue to raise equity or debt financing to support its operations until the Company is able to generate positive cash flow
from operations.
Note
2 – Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America (“US GAAP”). The accompanying consolidated financial statements have been presented
in United States Dollars ($ or “USD”). The fiscal year end is March 31.
Principles
of Consolidation
The
accounts of the Company and its wholly–owned subsidiary Canna-Life and GreenLife Botanix are included in the accompanying
consolidated financial statements. All intercompany balances and transactions were eliminated in consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions. These estimates
and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due
to the levels of subjectivity and judgment involved.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments
with original maturities of three months or less.
Revenue
Recognition
In
accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin No. 104,
Revenue
Recognition
, the Company will recognize revenue when it is realized or realizable and earned. The Company must meet all of
the following four criteria under SAB 104 to recognize revenue:
-
Persuasive evidence of an arrangement
exists
-
Delivery has occurred
-
The sales price is fixed or
determinable
-
Collection is reasonably assured
Inventories
Inventories
consisting of cosmetic products are stated at the lower of cost or market. Cost is determined using the first-in, first-out method
and are adjusted to actual cost quarterly based on a physical count. Net realizable value is the estimated selling price in the
ordinary course of business, less applicable variable selling expenses.
Intangible
Assets
The
Company accounts for intangibles in accordance with ASC 350, Intangible-Goodwill and Other. The Company evaluates intangibles,
at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be
recoverable. Impairment of intangibles is tested by comparing the carrying amount to the fair value. The fair values are estimated
using undiscounted projected net cash flows. If the carrying amount exceeds its fair value, intangibles are considered impaired
and a second step is performed to measure the amount of impairment loss, if any. The Company evaluates the impairment of intangibles
as of the end of each fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s carrying
amount may not be recoverable. These circumstances include:
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a
significant decrease in the market value of an asset;
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a
significant adverse change in the extent or manner in which an asset is used; or
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an
accumulation of costs significantly in excess of the amount originally expected for the
acquisition of an asset.
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The
Company recognized an impairment expense related to intangible assets during the nine months ended December 31, 2015 of $2,300,000
and nil for the nine months ended December 31, 2014
.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC Topic 740,
Income Taxes
. ASC 740 requires a company to use the
asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not
be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Under
ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would
be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount
of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more
likely than not” test, no tax benefit is recorded. The portion of the benefits associated with tax positions taken that
exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheets
along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable
interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of
operations. The open tax years are 2011, 2012, 2013, 2014 and 2015.
The
Company has no tax positions at December 31, 2015, or March 31, 2015, for which the ultimate deductibility is highly certain but
for which there is uncertainty about the timing of such deductibility.
Basic
and Diluted Loss Per Share
Earnings
per share is calculated in accordance with the ASC Topic 260,
Earnings Per Share
. Basic earnings per share is based upon
the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive
convertible shares and stock warrants were converted or exercised. Dilution is computed by applying the treasury stock method.
Under this method, warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later),
and as if funds obtained thereby were used to purchase common stock at the average market price during the period. There were
904,000 warrants outstanding at December 31, 2015, which were excluded from the diluted loss per share calculation as their inclusion
would be anti-dilutive.
Discontinued
Operations
The
Generally Accepted Accounting Principles framework requires special presentation treatment of discontinued operations. This requirement
refers to the results of operations of a component of an entity that is either being held for sale or which has already been
disposed of.
The
designated results of operations must be reported as a discontinued operation within the financial statements if both of
the following conditions are present:
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Resulting
elimination
. The disposal transaction will result in the operations and cash flows
of the component being eliminated from company operations.
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Continuing
involvement
. There will be no significant continuing involvement by the company in
the operations of the component, once the disposal transaction has been completed. Continuing
involvement implies the ability to influence the operating or financial policies of the
disposed component.
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Due
to the above requirements, the financial results relating to Canna-Life are classified as discontinued operations in the MYHI
financial statements.
Recent
Accounting Pronouncements
In
April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2014-08,
Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360)
. ASU 2014-08 amends
the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under
the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations
and financial results should be presented as discontinued operations. This new accounting guidance is effective for annual periods
beginning after December 15, 2014. The Company is currently evaluating the impact of adopting ASU 2014-08 on the Company's results
of operations or financial condition.
In
September 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting
Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation which removes the definition
of a development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting
entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present
inception-to-date information on the statements of operations, cash flows, and stockholders’ equity, (2) label the financial
statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the
entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior
years it had been in the development stage. The amendment is effective for annual reporting periods beginning after December 15,
2014. Early application is permitted. The Company chose to adopt ASU No. 2014-10 in the period ended March 31, 2014.
Other
recent authoritative guidance issued by the FASB (including technical corrections to the FASB Accounting Standards Codification),
the American Institute of Certified Public Accountants, and the SEC, did not, or are not expected to have a material effect on
the Company’s consolidated financial statements.
Note
3 – Advances from Stockholder
Alan
Smith, the Company’s Chief Executive officer and a director, has advanced money to fund the Company’s operations.
The amount due to stockholder at December 31, 2015 and March 31, 2015 was $16,100 and $441,895, respectively. The amount is unsecured,
due upon demand and non-interest bearing.
Note
4 – Discontinued Operations
The
Company had no activity for discontinued operations for three months and nine months ended December 31, 2015.
The
Company had a loss from discontinued operations of $7,016 for the three months ended December 31, 2014 and $890,473 for the nine
months ended December 31, 2014. The losses related to the discontinued Canna-Life operations that were sold in April 2015.
Note
5 – Equity
Common
Stock
The
Company has authorized 250,000,000 shares of common stock with a par value of $0.0001 per share and 250,000,000 shares of preferred
stock with a par value of $0.0001 per share.
The
Company issued 7,500,000 shares of common stock to its founder for $7,500 upon incorporation.
In
connection with a private placement offering, in March 2014 the Company sold 604,000 units, each unit consisting of one share
of the Company’s common stock and a warrant to purchase one share of the Company’s common stock. The warrants have
an exercise price of $4.75 and expire on March 6, 2017.
In
connection with a reverse merger transaction, the original stockholders of the Company retained 15,788,000 shares of common stock
of which 6,500,000 of those shares were purchased by Mr. Smith concurrent with the closing of the transaction between the Company
and Canna-Life (see Note 1).
On
December 8, 2014, the Company issued 250,000 restricted shares of restricted common stock to Richard G. Stifel, the Company's
CFO and a Director, for serving as a Director of the Company. The Company recorded an expense of $25,000 for the fair market value
of these shares.
During
March 2015, the Company sold 420,000 restricted shares of common stock through a private placement at $0.15 per share. These shares
were issued on April 14,2015
During
the three months ended December 31, 2015 the Company issued 336,667 restricted shares through a private placement at $0.15 per
share.
On
May 22, 2015, The Company issued 10,000,000 restricted shares to the shareholders of Greenlife Botanix pursuant to closing the
Share Exchange Agreement dated February 8, 2015. The shares were valued at the fair market trading value, $0.23, on the closing
date.
The
Company issued 353,600 restricted shares to a vendor in lieu of payment of $35,360 that was owed to the vendor at March 31, 2015.
The shares were recorded at the fair market value of $0.25 per share or $88,400. The difference in value, $53,040, was written
off as a loss on extinguishment of debt in the three months ended June 30, 2015.
Pursuant
to agreements with potential investors; Alan Smith, CEO and a Director, retired 2,000,000 shares he received from the reverse
merger referenced above. The share retirement was valued at par $0.0001 per share.
Warrants
On
April 3, 2014, the Company’s entered into a consulting agreement with Dr. Bob Melamede. Pursuant to the consulting agreement,
Dr. Melamede was to serve as a member of the Company’s newly formed Advisory Board and act as the Scientific Advisor of
the Advisory Board for a term of 12 months. In exchange for Dr. Melamede’s services, he was to receive: (1) $10,000 per
year, due and payable in advance; and (2) 300,000 common stock purchase warrants at an exercise price of $4.00 per share, that
vested immediately and shall expire on April 3, 2016.
The
fair value of the 300,000 warrants was determined to be $1,257,000, which was recorded as “Selling, general and administrative
expenses” on the accompanying consolidated statement of operations. The fair value was determined using the Black-Scholes
model with the following assumptions:
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Expected
volatility of 215%
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Risk-free
interest rate of 0.24%
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Expected
life of 2.0 years
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The
following table summarizes the warrant activity:
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Weighted
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Weighted
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Average
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Average
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Remaining
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Aggregate
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Number of
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Exercise
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Contractual
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Intrinsic
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Warrants
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Price $
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Life (in years)
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Value $
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Outstanding, March 31, 2014
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604,000
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$
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4.75
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Granted April 30, 2014
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300,000
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$
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4.00
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Exercised
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—
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Forfeited/Canceled
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—
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Outstanding, December 31, 2015
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904,000
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$
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4.50
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1.13
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Exercisable, December 31, 2015
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904,000
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$
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4.50
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1.13
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$
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—
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The
number and weighted average exercise prices of all warrants outstanding as of December 31, 2015, are as follows:
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Warrants
Outstanding and Exercisable
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Weighted
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Weighted
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Average
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Average
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Exercise
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Number
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Exercise
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Remaining
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Price
$
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of
Warrants
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Price
$
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Life
(Years)
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4.00
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300,000
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4.00
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0.26
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4.75
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604,000
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4.75
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1.18
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904,000
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Note
6 – Income Taxes
The Company
accounts for income taxes using the asset and liability approach in accounting for income taxes. Under this approach, deferred
tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributable
to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
calculated for income tax purposes.
The
Company has federal net operating loss carryforwards of approximately $4,278,765 expiring in various years through 2036. The tax
benefit of these net operating losses has been offset by a full allowance for realization. The use of the net operating loss carryfowards
may be limited due to the change in control.
Income tax
expense (benefit) consists of the following for the nine months ended December 31, 2015:
Current taxes
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$
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—
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Deferred taxes
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1,021,897
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Less: valuation allowance
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(1,021,897
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)
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Net income tax provision
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$
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—
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The Company’s
effective tax rate differs from the high statutory rate for the period ended December 31, 2015, due to the following (expressed
as a percentage of pre-tax income):
Federal taxes at statutory rate
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$
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34.0
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%
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State taxes, net of federal tax benefit
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5.0
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%
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Valuation allowance
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(39.0
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)%
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Effective income tax rate
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$
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0.0
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%
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As
of December 31, 2015, the components of these temporary differences and the deferred tax asset were as follows:
Deferred Tax assets:
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Net operating loss carryforward
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$
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2,076,205
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Less: valuation allowance
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(2,076,205
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Net deferred tax assets
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$
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—
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Note
7 – Commitments and Contingencies
Master
Property Purchase and Sale Agreement
On
April 30, 2014, the Company entered into a Master Property Purchase and Sale Agreement (the “Agreement”) with Deep
Blue Enterprises, LLC, a Colorado limited liability company that is the successor in interest to New Alternatives Consulting LLC
(“Deep Blue”). Subject to the terms and conditions of the Agreement, the Company shall acquire 100% of
Deep Blue’s interests in three properties commonly known as the “Isabelle Property,” which is located in Lafayette,
Boulder County, Colorado, the “Pueblo Property,” which is located in Avondale, Pueblo County, Colorado, and the “Madison
St. Property,” which is located in Denver, Denver County, Colorado (collectively referred to herein as the “Properties”).
As consideration for the acquisition of Deep Blue’s interests in the Properties, the Company shall pay to Deep Blue an aggregate
of $12,500,000 which is payable in various installments over the next year. Effective August 2014, the Company let the Agreement
with Deep Blue expire. The monies paid to Deep Blue during the due diligence period were unrecoverable from Deep Blue and written
off as of December 31, 2014.
On
September 12, 2014, the Company completed its due diligence on the purchase of 2.38 acres of property and related structures known
as the Greenhorn property, located in Pueblo Colorado. The Company has advanced $6,000.00 earnest money for the Greenhorn property,
through a related party. During November the Company decided not to pursue the purchase of the Greenhorn property due economic
changes in the market and expensed all costs related to the purchase, $7,000 to selling, general and administrative expenses.
Note
8 – Subsequent Events
The
Company has determined that there are no subsequent events to report pertaining to the three months ended December 31, 2015.